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M4 - Summary of Reading - Questions and Answers

Purpose Students are expected to actively engage with the assigned reading materials. Following the instruction for each week, students will provide a summary of assigned readings or answers to the guiding questions for the readings

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Syamsul Bahri Hs
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15 views

M4 - Summary of Reading - Questions and Answers

Purpose Students are expected to actively engage with the assigned reading materials. Following the instruction for each week, students will provide a summary of assigned readings or answers to the guiding questions for the readings

Uploaded by

Syamsul Bahri Hs
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Respond to each of the following prompts.

Summarize the purpose of the budget and explain different types of budgets.

The purpose of a budget in higher education is to serve as a financial roadmap that


outlines the planned revenues and expenditures over a specific period. It acts as a crucial tool
for planning, controlling, and evaluating financial resources (Fichtenbaum, n.d.). The budget
helps institutions allocate resources efficiently, set priorities, and ensure that financial decisions
align with strategic goals (Varlotta, 2010)

There are several types of budgets:


● Operating Budget
This budget focuses on the day-to-day expenses of the institution. It includes costs
related to salaries, utilities, supplies, and other routine expenditures (Varlotta, 2010 p.8).
● Auxiliary Budget
In most institutions, public and private, auxiliary budgets are segregated from the
general fund budget or the overall educational budget since the units they support are
intended to operate without any subsidy from the institution. Conversely, the revenues
that auxiliaries generate are used to subsidize the institution’s mission (Varlotta, 2010
p.9).
● Capital Budget
This budget is concerned with major investments, typically for the acquisition or
improvement of long-term assets like buildings, equipment, and infrastructure (Varlotta,
2010 p.9).
● Incremental Budgeting
This method builds on the previous year's budget, making adjustments based on
changes in activity levels or costs. It's less time-consuming but may not encourage as
thorough of a review as zero-based budgeting (Varlotta, 2010 p.15).
● Zero-Based Budgeting
This approach starts from scratch each year, requiring every expense to be justified,
regardless of past budgeting. It encourages a thorough review of each line item's
necessity (Varlotta, 2010 p.16)

Pick two budget models you think are most appropriate for the current higher education.
Explain the features of the selected models and discuss why you think these models
best serve institutions of higher education in the present time.

1. Activity-Based Budgeting (ABB)


This model aligns resources with a specific cost- control mechanism that can add
nuance to and maximize workload estimators and other cost savings strategies. The
goal is to formulate reliable and usable cost information that genuinely reflects the
“cause and effect relationships between costs, activities and products or services” It's
particularly relevant in higher education because it helps institutions allocate funds
based on the actual costs associated with delivering educational programs. ABB
promotes transparency and accountability (Varlotta, 2010 p.13).

2. Responsibility Center Management (RCM)


RCM decentralizes budgetary authority to individual units or departments, making them
responsible for generating revenue and managing expenses. Among the many unique
benefits that RCM provides is the improvement of openness and accountability in an
organization and also ensures a clear picture of resource allocation and promotes a
transparent culture by giving units accountability for their own financial performance.
RCM model encourages entrepreneurial thinking and can align resources with strategic
priorities.

Both ABB and RCM can be effective in the current higher education landscape. ABB
ensures that resources are allocated efficiently to support core educational activities, while RCM
empowers departments to take ownership of their financial performance.

Explain how budgeting might be different between private and public institutions.

1. Governmental Support
Public institutions are subject to more public oversight, including compliance with state
regulations and open meeting laws. Private institutions have more autonomy but may
still be subject to accreditation and other regulatory bodies.
2. Tuition and Fees
Public institutions often receive subsidies from the state, allowing them to offer lower in-
state tuition rates. Private institutions typically have higher tuition rates and, but they
may also offer more substantial financial aid packages.
3. Student Financial Aid
Public institutions rely heavily on state funding, which can be subject to political and
economic fluctuations. Private institutions, on the other hand, rely more on tuition,
donations, and endowments. They have greater flexibility in revenue sources.
4. Constituent support
The constituent support base is broader for public institutions than for private institutions.
Public institutions are indirectly impacted by the community that provides financing for
them; in the case of a state-funded public institution, this community may include both
potential supporters and detractors, while some private schools and universities have a
wider constituency base than others, but it is still regional.
5. Accounting
Public and private institutions follow different accounting standards which Governmental
Accounting Standards Board (GASB) for public and The Financial Accounting Standards
Board (FASB) for private), which can affect how financial data is reported. GASB
governs public entities, such as municipalities and their supporting/supported entities.
Most GASB organizations are non-profit, while FASB governs private entities, such as
for-profit and nonprofit commercial and charitable organizations.
Understanding these differences is crucial for budget planners, as it informs decisions
about revenue streams, tuition structures, and compliance requirements in their respective
institutions. Private higher education institutions are those that are owned and run by the private
sector. Public institutions, on the other hand, are those that were set up, are backed, and are
controlled by the government, usually a state. There are important differences between public
and private groups that have big effects on budgeting. Some of these differences are in how the
government works, how much students pay, how they get financial help, how much support they
get from the people, and the rules for accounting. But in the end, both public and private
colleges and universities need to be careful to do what's right for the public good, since higher
education is important in general (Beamer, 2011).
References

Beamer, S. A. (2011). Private vs. Public Higher Education Budgeting.

Fichtenbaum, R. (n.d.). Understanding College and University Financial Statements.

Varlotta, L. E. (2010). Becoming a leader in university budgeting. New Directions for Student

Services, 2010(129), 5–20. https://doi.org/10.1002/ss.347

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